Great Portland Estates makes solid leasing and sales progress

Great Portland Estates updated the market on its trading for the quarter to 30 June on Thursday, reporting a number of leasing successes ahead of kits March estimated recovery value.

The FTSE 259 company said 11 new lettings totalling 41,700 square feet were signed in the period, generating annual rent of £2.5m, of which its share was £1.6m.

Market lettings were said to be 1.9% ahead of the March estimated recovery value.

A total of nine rent reviews were settled in the quarter, securing £5m per annum, which was 20.8% above previous the passing rent and 5.1% ahead of the estimated recovery value; with remaining reversionary potential of 9.2% or £9.7m.

Great Portland said 20 lettings were also under offer, totalling £4.4m per annum of rent of which its share was £3.8m, which was 4.4% ahead of the March estimated recovery value.

The company successfully trialled a flexible space offering across 12,000 square feet, which it said secured rent at a 35% premium to the net effective rental value; while it was still appraising a further 100,000 square feet across its existing portfolio.

Its vacancy rate stood at 6.3%, or falling to 4.6% if all investment lettings under offer were converted.

A total of 99.0% of rent was collected within seven working days, with no occupier delinquencies during the quarter.

On the development front, Great Portland said it made “good progress” during the period, with its flexible programme covering 49% of its existing portfolio.

The property at 160 Old Street, totalling 161,700 square feet, was completed in April and was now 71% let, with a further 9% under offer and strong interest in remaining space.

Great Portland reported 19.6% profit of cost there.

It also claimed positive progress across its three committed schemes of 412,000 square feet, including its Hanover Square estate - which was already 25.8% pre-let - all located near to Crossrail stations.

On those schemes it forecast a 15.9% profit on cost, with capital expenditure to come in at £233.0m, and the board reporting “encouraging” levels of occupier interest.

It said it had an “exceptional and flexible” development pipeline of 13 schemes totalling 1.3 million square feet, which were all currently income producing, with a 3.6 year average lease length, 12.2% reversionary.

Looking at sales, Great Portland said it made commercial sales of £49.6m in the quarter, at 2.4% ahead of book value.

The sale of 78/92 Great Portland Street and 15/19 Riding House Street for £49.6m brought a net initial yield of 3.9% and a capital value of £1,362 per square foot; which the board said “crystallised” its development profit on cost of 12.4%.

Around £150m was currently in the market for sale, with Great Portland explaining that it was seeking to crystallise further surpluses and take advantage of “strong” investment markets.

Great Portland added that it remained in a “strong” financial position, with £306m returned to shareholders via a B share scheme.

Its loan-to-value ratio stood at 12.6%, with its weighted average interest rate at 2.3% and drawn debt 100% fixed or hedged.

Cash and undrawn committed facilities were £636m at the end of the period, with the board reporting a marginal cost of debt of 1.6%.

“I am pleased to report another quarter of positive operational activity with healthy leasing, ahead of ERV, and encouraging occupier interest across our three newly committed development schemes which are already 11% pre-let,” said Great Portland chief executive officer Toby Courtauld.

“We continue to attract occupiers for our brand of high quality, well located, sensibly priced space with £4.4m of lettings currently under offer at a 4.4% premium to March 2018 ERVs.”

Courtauld said that despite ongoing economic and political uncertainty, the company was in “great shape” with “enviable” long-term potential.

“Five years of net sales activity gives us unprecedented financial capacity even after returning more than £400m to shareholders; our investment portfolio is well let, off low average rents and we are capturing its reversionary potential; our committed development programme is progressing well; our exceptional income-producing development pipeline offers more than 1.3 million sq ft of flexible future growth potential; and we have a first-class team ready to capitalise on our many opportunities.”